Sunday, May 24, 2015

BABA - Change of Character

Welcome back, Traders and Wealth Builders.

Back in September of 2014, Chinese Internet retailer Alibaba (BABA) went public in what was the largest IPO of all time at least in terms of market capitalization.  After a nervous opening day (perhaps due to the previously botched IPO with Facebook) BABA opened in the 85 range and soon rallied all the way up to the 120 area.

After that it was a slow grind down and BABA disappointed many initial investors.  Earnings have been decent, but the prospect of ongoing litigation regarding not doing enough to stop the selling of counterfeit goods as weighed on the shares.  And your humble blog author lost some money on the shares, looking for a low around 90 but washing out in the high 80's once the shares broke down.

But things changed when the company reported earnings back on 5/7/2015.  Not only did earnings beat estimates by almost 100%, the issues around litigation seem to be resolved.  Since then there has been a steady stream of good news including a partnership between AAPL and BABA.  Add to that the fact that fellow internet retailer AMZN shares have been on a rip to the upside along with the rest of the market.

Taking a look at the voodoo, BABA still has yet to make it back to the top of Elliot Wave 1 at $100. I traded some call option and sold a put spread this past week (Carter would be proud) and had one of my best option trades of the year. As for now, I have no position, but I expect BABA has some further upside at a minimum up to the top of Wave 1 at $100.  A pullback to the breakout point at $90 would provide a good opportunity for re-entry.

Have a great memorial day holiday and a great week ahead.

Sunday, May 10, 2015

FB, Amazon and Netflix Revisited

Welcome back traders and Wealth Builders.

In my prior blog post, I covered these same 3 stocks, FB, AMZN and NFLX.  But they are so interesting, and respect the Fib levels so nicely, the trio is worth another look.

First up in Facebook.  After reaching a new all-time high back on March 24 the stock has been in retreat.  This past week is found support just 10 cents from the white line at 76.95.

Obviously this stock has under performed recently.  But sometimes, the long-term trend trumps any short-term weakness and I remain fully positioned to the long side and have not sold any shares.

Next up is AMZN. After an upside earnings surprise, the stock ripped out to a new all-time high gapping past the 423% line. In my prior post, commented that I expected the stock to fill the gap before resuming its uptrend.  But instead, notice how the stock came down and kissed the 423% line then headed straight higher.

I have no position in AMZN, but I am starting to rethink the company.  It's not so much about earnings per share. Its about the dominant affect this company is having on retailing.  Amazon is disrupting traditional retailing and creating entire new economizes where they facilitate business.

I recently listened to a presentation by a John Carter friend who described how he sets up businesses to sell things on Amazon.  He selects the products and has the manufactured and shipped to Amazon who handles the fulfillment and shipping.  He never has to handle the the inventory and his risk is limited more or less the price he paid for the inventory.   Of course he was also selling a course and mentor ship for $5000 where you could learn to do the same.  I passed on that of course, but the impression is made was palpable.

Think about this for a second.  If you wanted to buy something, and knew more or less what you wanted, why not buy it on Amazon?  Up there there is the worlds single largest collection of sellers competing for your business on price and user feedback. And when you are done, you point and click your way to fulfillment.  And with the prospect of Amazon Prime (which includes free shipping) I can see more and more people do business on Amazon.  To summarize, its not about earnings its about market share.  I have no current position in AMZN, but will be watching as the stock approaches the previous high.

Last up is NFLX.  After an upside earning surprise the stock has been consolidating just under the tree line at 574.60.   But it seems determined to make a break to the upside and once it does, the next green line is overhead at 606.  That's neatly a $30 move and could pay off quite well on a small (1 lot) option position.

To summarize, here are 3 fascinating and disruptive companies with the shares all within striking distance of new all-time highs.  Watch them carefully and pounce when the time is right.

And have a great week ahead.